PARIS - Before Noël Goutard came along 13 years ago, Valeo was an ailing, midsized French parts maker selling mainly to Renault and Peugeot-Citroen. Today it is a giant that wants to supply all carmakers everywhere with almost everything.
Under Goutard, who retired last month, the company has expanded as rapidly as any major supplier in the world. The new CEO, André Navarri, wants to move just as fast.
He inherits the largest supplier in the world not headquartered in North America, Germany or Japan. It ranks among the global top 10 in revenue and Navarri -the 47-year-old former head of the Alstom division that builds the TGV high-speed train - aims to crack the top five by 2004.
To get there he wants Valeo to be ubiquitous. 'Everything which is in a car can be of interest to Valeo,' said Navarri, a tall, confident executive who toughened himself negotiating railway deals in Asia.
Now he is fighting for some of the biggest supply contracts in auto history. The battleground is multipart modules for multibrand global car platforms.
The stakes are huge. With so much riding on massive contracts with a declining number of car groups, Tier 1 suppliers can win or lose big.
Valeo is already a big winner in front-end modules. It is ready to start shipping front-end units by the millions - combining its expertise in radiators, lighting, condensers and fans in integrated units.
But it is also focusing on three other regions of the car - doors, rear-ends and cockpits. Especially cockpits.
Goutard positioned Valeo so that it can compete for these super-contracts - the deals that will decide who dominates the auto supply business in the new century. But a few years ago Valeo was not even in the race.
As late as 1997, only 26 percent of its sales were outside Europe. Today it is 40 percent and rising. The short-term goal is 50 percent in Europe and 50 percent outside.
After being heavily dependent on French customers, sales in France now account for only about 20 percent of the total.
Navarri aims to double 1999 revenues of A7.7 billion within four years.
'My first objective is to pull Valeo into the top five,' he said. 'We also want to be the most exciting company in this industry in terms of performance and creativity.'
Some growth will come through acquisition. In Japan, Valeo has moved quickly to take advantage of Renault's alliance with Nissan. It has formed a joint venture with Japanese clutch supplier Unisia Jecs and has linked with Japan's Zexel Corp. to make air conditioning systems. Valeo also has an alliance with Japanese lighting equipment maker Ichikoh Industries. It continues to look for an electronics partner in Japan.
Meanwhile, Navarri aims to strengthen Valeo's cost competitiveness by shifting much of its manufacturing base outside high-cost western Europe and the USA and by making the company an e-business innovator (see story below).
But the big module contracts will determine whether Valeo enters the top five.
'This is the future,' said Navarri, 'The objective of Valeo is to be a leader in modules and in systems.'
Cockpits, which are increasingly being outsourced by carmakers, offer huge potential. The pursuit of lucrative deals has driven mergers and alliances among suppliers trying to integrate the various cockpit functions.
Companies with technology bases as dissimilar as Bosch and Lear are going head-to-head for contracts. They are competing to become architects of units that combine instrument panels, wiring, steering wheel, foot pedals, air conditioning, and entertainment and navigation systems.
In 1998, Valeo formed a partnership with Plastic Omnium to develop cockpits. The alliance was dissolved when Ford's Visteon Automotive bought Plastic Omnium's interiors business last year. Now Valeo needs a new partner.
'We already have air conditioning and electronics, we are reinforcing our electrical distribution capability with Sylea. (Valeo bought 53 percent of Labinal's cable maker in May.) But it's clear that we'll have to develop partnerships with interior component makers.'
Analysts say French interiors supplier Sommer-Allibert is the most likely candidate.
'It can be a partnership, it can be an acquisition,' said Navarri. 'We are very open. The goal is to be leader in cockpits.'
Valeo used its existing in-house capabilities to make a big push into front-end modules.
'If I look at the booked orders we are today the world leader in front-end modules,' said Navarri. 'We will deliver more than 2 million modules in 2003 for several automakers: Volkswagen, Renault, Ford, Fiat, and others.'
Valeo is so focused on modules that it has changed its organization to manage them. Divisions have been formed for each of the four units - front-end, rear-end, doors and cockpits.
'Every time we have a significant business in modules, we set up a separate, accountable structure,' said Navarri. 'Our structure for front-end modules is responsible for the business worldwide. They are in charge of the business.'
Making money with modules is more complex than making and selling individual parts.
'It's a different game,' said Navarri. 'We know how to set up light manufacturing facilities near the OEMs' plants to assemble the modules. What is a different is that they are systems. To be successful you need to do more than assemble components, you need to find innovations. That's why we set up separate entities.'
The new divisions report to one of Valeo's 10 component branches. For example, the front-end modules division answers to engine-cooling operations.
'There are two key factors for success in modules,' said Navarri. 'First, you need a sufficient portion of the value-added of modules in-house. That gives you the engineering resources.
'But even if you master the individual components, the real winners are the ones who improve the cockpit system by working together to improve functionality, cost and manufacturing capability.
'In front-end modules we are proposing quite innovative concepts in the way we interface the structure, lighting, and also the way to assemble them.'
Navarri will maintain the overall structure of the company set up by Goutard. Valeo's 10 different business units include climate control; engine cooling; lighting systems; clutches; electrical systems; wipers; security systems; electronics; friction materials; and aftermarket.
He will keep it vertical, instead of regional.
'We have to make sure that experts in Europe, North America and Japan are able to do r&d on a worldwide basis and also adapt to the local needs,' he said. 'One of our goals is to better leverage these synergies.
He dismisses talk that Valeo is in too many business sectors.
'They are right for what the car industry now requires - comfort, safety, environment.'
Most of the growth outside Europe is expected to come from Asia following the new alliances in Japan. But Valeo's business in North America is also expected to grow.
'More than 30 percent of our sales are in North America,' he said. 'That is not yet at the weight of the North American market worldwide, which is close to 38 percent. So I see opportunity to grow.'
Valeo will shift its production base away from western Europe over the next three years. It plans to cut 6,000 jobs, or 12 percent of its work force, and to invest heavily in developing areas such as central Europe and Mexico. The focus in western Europe will be on production of more complex components.
'I think this will be a major competitive advantage,' said Navarri. 'We are redesigning our European and North American operations to make sure we produce what should be produced in the right place.'